IT’S long been a standing joke among hoteliers that January is “the month when Yorkshire is closed”.
Bad weather, the return to work, and credit card bills dropping on people’s doormats after the Christmas spending spree form a triple whammy for the Yorkshire leisure sector.
And the New Year has just checked in more worrying news for an already anxious sector – UK hotel insolvencies have reportedly hit a five-year high.
Insolvencies have rocketed by no less than 60% to 144 in the nine months to September 30 2019, compared to just 90 the year before, according to figures from the Insolvency Service.
Among those caught up in financial struggles was the Esplanade Hotel in Scarborough in North Yorkshire, which was one of four put up for sale by administrators of the Northern Powerhouse Developments company in September.
The business that ran the Fleece Hotel in Richmond, North Yorkshire, was also among those liquidated, with reported debts of more than £200,000.
It was also a year than saw the well-known brands Laterooms and York-based Superbreak enter administration in August, after collapsing into insolvency.
This upward trend in insolvencies is being blamed on a number of drivers, not least a slowing UK economy for much of the past 18 months, which has prompted businesses to tighten the purse strings and rein in on conferences and “away days”.
Corporate events have long been a revenue “cash cow” for hotels all-year-round, as they provide a regular source of income from venue hire, room bookings, as well as food and drink. Many clients were repeat customers.
Hotels battling insolvency are also having to contend with weaker demand from hard-pressed consumers.
Although there has been a domestic boost from UK nationals opting for “staycations”, insolvency researchers revealed that overseas tourist numbers are in freefall.
Competition in the sector has sharply increased following a surge in other options, such as Airbnb and long-term lets – especially in towns and cities such as York, Harrogate and Leeds.
This has also pushed down room prices, putting pressure on margins, after a surge in the number of hotel rooms in the UK.
Last year 15,500 rooms were added to the UK hotel market with a further 19,300 forecast for the year ahead – an injection of capacity that only serves to heighten fears of more insolvency victims.
Researchers also highlighted how hotels are also under pressure to list on sites such as Booking.com, to reach as many potential customers as possible. However, these sites often levy large referral fees – slashing hotels profit margins.
Margins are also squeezed by increases in the minimum wage, import costs and business rates, they added.
The report, carried out by chartered accountants UHY Hacker Young, also raised the insolvency pressures of the National Living Wage, which has increased four times in just over three years, most recently by 5% in April this year reaching £8.21.
The weakness in Sterling has driven up the costs of importing food and drink, which, with ever-increasing competition in the insolvency-hit sector, is a real struggle to pass on to customers.
Here at Walsh Taylor, when financial difficulties arise, we’ll put time on your side.
For more information on how our licensed insolvency specialists and business recovery teams in Leeds, Bradford, Harrogate and Darlington can help you, please call us on 03300 244 660 or email firstname.lastname@example.org